Inequality in the Philippines still high, says ADB

Inequality in the Philippines might have not changed rapidly in the last 20 years, but the gap between the rich and the poor in the country is still significantly high according to Juzhong Zhuang, Deputy Chief Economist of Asian Development Bank (ADB). The ADB called on the government to address the disparity amidst the steady economic growth the region is projected to achieve in 2014 and 2015.

The Philippines remains to have the highest Growth Domestic Product (GDP) growth in Southeast Asia despite the projected decrease in this year’s GDP at 6.4 per cent, from 7.2 per cent in 2013, and slight increase in 2015 at 6.7 per cent.

However, despite the rosy economic climate in Asia, the levels of inequality alarm ADB as observed in the rise of Gini coefficient, a key measure of inequality, in 12 Asian economies especially the most populous such as People’s Republic of China, India and Indonesia, as well as in the Philippines.

Technological progress, globalisation, and market-oriented reform can be a double edged sword as they were identified as drivers of growth but at the same time were the causes of inequality according to an ADB report entitled “Rising Inequality in Asia and Policy Implications”.

It is important to address inequality, the report said, as this hampers economic growth itself, debilitates poverty reduction efforts, reduce middle class by leaving more people at the extreme ends of income distribution, trigger political repercussions and affect the crime and violence situation in turn conditions the investment climate in a country.

To respond to these issues, Zhuang recommended that Asian governments spend more on education, health care and social services as they lag behind their Latin American and OECD counterparts.

Developing Asia allocates 2.9 per cent of GDP compared to 5.5 per cent in Latin America and 5.3 per cent in OECD countries, and the least on health care at 2.4 per cent compared to 3.9 per cent in Latin America and 8.1 per cent in OECD countries.

Zhuang added that realigning government spending on these sectors do not only reduce inequality but also augment productivity and enhance human capital.

In the case of the Philippines, Zhuang said in an interview with ABS-CBNnews.com, the challenge for the country is to create more jobs and to develop the manufacturing sector.

“Obviously to reduce inequality, we think, one is to create more jobs and to develop the manufacturing sector where quality jobs and labour-intensive jobs would come from. And of course at the same time the service sector remains important as it has been in the past.”

Zhuang also mentioned the need to increase tax collection and once again stressed the importance of spending more on education and health.

“Another issue for the Philippines is to broaden the tax base so more tax revenues will be collected and an important issue is to improve tax administration and enforcement. I think the fiscal policy has a greater role to play in addressing inequality and of course also to reduce poverty,” he added.

Inequality in the Philippines might have not changed rapidly in the last 20 years, but the gap between the rich and the poor in the country is still significantly high according to Juzhong Zhuang, Deputy Chief Economist of Asian Development Bank (ADB). The ADB called on the government to address the disparity amidst the steady economic growth the region is projected to achieve in 2014 and 2015.

The Philippines remains to have the highest Growth Domestic Product (GDP) growth in Southeast Asia despite the projected decrease in this year’s GDP at 6.4 per cent, from 7.2 per cent in 2013, and slight increase in 2015 at 6.7 per cent.

However, despite the rosy economic climate in Asia, the levels of inequality alarm ADB as observed in the rise of Gini coefficient, a key measure of inequality, in 12 Asian economies especially the most populous such as People’s Republic of China, India and Indonesia, as well as in the Philippines.

Technological progress, globalisation, and market-oriented reform can be a double edged sword as they were identified as drivers of growth but at the same time were the causes of inequality according to an ADB report entitled “Rising Inequality in Asia and Policy Implications”.

It is important to address inequality, the report said, as this hampers economic growth itself, debilitates poverty reduction efforts, reduce middle class by leaving more people at the extreme ends of income distribution, trigger political repercussions and affect the crime and violence situation in turn conditions the investment climate in a country.

To respond to these issues, Zhuang recommended that Asian governments spend more on education, health care and social services as they lag behind their Latin American and OECD counterparts.

Developing Asia allocates 2.9 per cent of GDP compared to 5.5 per cent in Latin America and 5.3 per cent in OECD countries, and the least on health care at 2.4 per cent compared to 3.9 per cent in Latin America and 8.1 per cent in OECD countries.

Zhuang added that realigning government spending on these sectors do not only reduce inequality but also augment productivity and enhance human capital.

In the case of the Philippines, Zhuang said in an interview with ABS-CBNnews.com, the challenge for the country is to create more jobs and to develop the manufacturing sector.

“Obviously to reduce inequality, we think, one is to create more jobs and to develop the manufacturing sector where quality jobs and labour-intensive jobs would come from. And of course at the same time the service sector remains important as it has been in the past.”

Zhuang also mentioned the need to increase tax collection and once again stressed the importance of spending more on education and health.

“Another issue for the Philippines is to broaden the tax base so more tax revenues will be collected and an important issue is to improve tax administration and enforcement. I think the fiscal policy has a greater role to play in addressing inequality and of course also to reduce poverty,” he added.